Posted by Bud on September 29, 2009 at 13:28:17:
To: Westwood One Employees
From: Rod Sherwood, President
Date: September 29, 2009
In early August, when we released Westwood One's second quarter 2009 earnings results, I reported that, despite recent suggestions that the economy was improving, we remained very cautious about the outlook for the rest of 2009. At that time, advertising revenue for the radio industry overall was reported to be down approximately 23% in the first half of 2009 versus the comparable period in 2008.
Earlier this year, as a result of the softness in the marketplace, we took major steps to reduce our operating costs in order to align them with our declining revenue. Our strategies were clear: We re-engineered the organization, particularly in Metro Traffic, to save substantial operating expenses and to improve the consistency of customer service. We implemented a wide range of cost reduction and efficiency improvement programs across the Company. We also made selective investments in areas of the Company that could generate increased revenue and improved customer service, like additional salespeople, new programming and improved system support. As a result of these actions, we have achieved significant expense savings while positioning the Company to benefit from an eventual economic recovery.
In spite of all our efforts, and the sacrifices our employees have made, we are not yet experiencing the kind of revenue growth we need to meet our financial goals and support our current cost structure. We have experienced a revenue shortfall this third quarter, and we face continued uncertainty in the fourth quarter.
Moreover, no one can accurately predict when a sustainable recovery in the advertising marketplace and the radio business will begin. Consequently, we have to take prudent business actions to further reduce our costs now in order to protect, and position, the Company for long-term success and growth in 2010.
In determining this course of action, we made every effort to avoid layoffs. We looked for ways to be as fair as possible by making sure that everyone in the Company shares in these sacrifices, without having people lose their jobs. We also wanted to recognize the contributions our employees have made this year. We are proud of the people who have dedicated their time, energy and skills to improving the Company during this difficult economic period. There is no good solution to this problem, but we have tried to be as balanced as possible in our approach.
Today we are announcing a fourth quarter cost reduction plan that requires all of us to give up something, and we are also announcing an opportunity to gain something in the future. The program is mandatory for all full-time employees, with limited exceptions for operational necessity. Network and Metro advertising sales will be implementing separate plans for sales management and employees. We will also shortly be discussing the plans with the unions that represent our employees and expect that they will participate.
Our fourth quarter cost reduction plan has two parts:
(1) A reduction in compensation equal to 5 days pay, spread out over 10 weeks.
(2) A one-week, or 5-day, unpaid furlough consisting of Thanksgiving and the day after, which are currently paid holidays and will not be paid, plus 3 additional furlough days that employees are being asked to schedule.
Separately, after reviewing our overall pay compensation, we have put in place a 2010 Performance Bonus Plan. Eligible employees will receive this 2010 Performance Bonus in an amount equal to 5 days pay plus an additional 10% as an added bonus. Eligible employees will also earn one additional paid vacation day per calendar quarter in 2010 to be used in 2010 only. The Terms and Conditions of both plans are described at the end of this letter.
I know you have all made sacrifices, and are working hard on behalf of the Company. We know how difficult this year has been for you and your families and we are doing what we can to improve
your situation next year with the 2010 Performance Bonus plan.
During this period, all of us together can make a contribution to change and improve how the Company does business. Our customers, affiliates, partners and other employees deserve our best.
Thank you for all that you are doing to help us reach our goals.
TERMS AND CONDITIONS
2009 Q4 COMPENSATION REDUCTION PLAN and FURLOUGH
Participants:
-- Full-time employees with limited exceptions for Company employees whose absence from the office would require compensation for substitute employees.
-- Discussions will be held immediately with representatives of unionized employees.
-- Advertising sales will be implementing specific separate plans.
-- Employees hired on or after September 1, 2009 will not be subject to this plan.
Total effect on compensation: 10 days
A. Pay reduction equal to 5 days pay over 10 weeks (10/12 – 12/20).
B. 5 days unpaid furlough consisting of Thanksgiving and the day after Thanksgiving, plus 3 additional days.
Part 1: Pay Reduction
-- For each of 5 payrolls over the 10-week period described above, employees' pay will be reduced by
the equivalent of one day's pay for a total of 5 days.
-- The compensation reduction will cease on December 21, 2009.
Part 2: Furlough
-- Employees must take off 1 unpaid week (5 days) from work during the 10-week period described
above. Thanksgiving and the day after Thanksgiving will constitute 2 days of the furlough and be unpaid. The remaining days can be taken as 3 consecutive days or as 3 individual days, the scheduling of which shall be determined an employee and his/her manager.
TERMS AND CONDITIONS
2010 PERFORMANCE BONUS AND ADDITIONAL PAID VACATION
Certain Company employees will be eligible for a 2010 Performance Bonus in consideration for services rendered by them in 2010 as follows:
-- The 2010 Performance Bonus will equal an employee's 5 days' pay plus an additional 10% as an added bonus.
-- The 2010 Performance Bonus will be earned over the first half of 2010 and be paid in three (3) equal installments. In order to receive each payment, except as noted below, an eligible employee must provide services to the Company from January 1, 2010 through the following dates to earn each respective installment: February 28 (first installment), April 30 (second installment) and June 30 (third
installment). Payments of each installment will be made on the first pay day directly after these dates.
-- If an eligible employee's employment ceases in 2010 due to the employee's termination other than for "cause" or resignation, on April 1, 2010 or later, as part of his/her termination benefits, the employee will be entitled to receive all of the 2010 Performance Bonus as part of his/her termination benefits, which shall be paid in accordance with the pay schedule set forth above.
-- If an eligible employee's employment ceases in 2010 due to the employee's termination other than for "cause" or resignation, before April 1, 2010, as part of his/her termination benefits, the employee will be entitled to receive his/her pro rata portion of the 2010 Performance Bonus, which shall be paid in accordance with the pay schedule set forth above. The pro rata portion shall be calculated based on the number of days the employee worked in 2010 prior to the date of termination divided by 181 days.
-- If an eligible employee's employment ceases in 2010 due to a voluntary resignation or for "cause" termination, the employee will be entitled to receive only those payments already paid to the employee and will not be eligible to receive any future payments.
-- Eligibility for the 2010 Performance Bonus and additional paid vacation is contingent upon an employee's providing services to the Company in 2010.
-- In addition, certain Company employees who provided services to the Company in 2010 will earn one (1)additional paid vacation day per quarter in 2010, which will begin to accrue on the first day of the quarter, and may only be used in 2010. These additional vacation days will be subject to the Company's vacation policy in all respects.